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Competition in the mobile phone arena is about to get really real. Apple's iPhone -- available only on AT&T (T)-- has been the toast of the mobile world in recent years, but now Google (GOOG) is set to unleash a worthy challenger. Through its Android open-source mobile operating system and a pact with Verizon Wireless, the two companies have begun an all-out assault on the iPhone, starting with an in-your-face TV spot mocking the popular handset and introducing consumers to Droid.

Over the weekend, TV watchers got their first glimpse of Verizon's Droid, an upcoming device the mobile giant hopes will give it enough presence to challenge Apple (AAPL) and AT&T's iPhone as well as Canadian smartphone giant Research in Motion (RIMM), which recently released a series of new feature-rich BlackBerry devices.

Verizon Wireless' gambit is nothing if not bold: The mobile giant is trying to convince consumers that while iPhones may be kind of cool for geeks, if you want to be a badass, get a Droid. The mobile giant licensed the name from Star Wars creator George Lucas, and the phones are scheduled to arrive in November.

The commercial, with happy hipster-pop and white letters set against a black backdrop intended to mock Apple's own ad campaign, lists all the things the iPhone "can't" do -- like no keyboard, can't "customize," no widgets, etc. "IDon't allow open development," the spot jabs, in a reference to Apple's closed, proprietary software environment. Then the video signal cuts out, and the camera jerks around, as if to evoke some kind of disruption. "Everything iDon't, Droid Does," the spot intones.

Dennis Crowley, founder and CEO of Foursquare, the red-hot mobile networking service, which boasts both iPhone and Android apps, says teaming up with Verizon Wireless is "a huge win for Android."

"The big question for developers is whether it's going to be as easy to keep building for Android as it's been for the iPhone," Crowley told DailyFinance. "With the iPhone, it's been one phone and one screen size. Until now, Android has been easy because it's been on two to three devices with basically one screen size. But when you roll a new operating system out across a ton of different phones with different screen sizes," it becomes more difficult for developers, Crowley said.

With the arrival of the new phones next month, the market dynamics will be changed in a big way. If Apple set a new benchmark for device design, Google is trying to establish a new standard for open mobile software platforms. And that should mean more innovation and more competition.

"The biggest threat to Apple is that the market is opening up to Palm and Android, with Nokia (NOK) floating around in the background," Charlene Li, a founding partner at Altimeter Group, a Silicon Valley-based tech consultancy, told DailyFinance. "What happens when you have that rich diversity in the space is that it's no longer Apple versus Google, it's Apple versus everybody.

"This is going to force Apple and AT&T to innovate even faster," Li said. "They've been doing a good job with the iPhone, but there are serious compromises people have had to make, from the network, which has been spotty, especially in New York City where the system is really hard to get onto, to features like simultaneous apps that have been missing for two years.

"Apple will try very hard to match the new phones," Li said. "And that will be great for consumers."

Consumers are already benefiting from new upstarts in the market, most notably HTC -- which until recently barely had any brand recognition in the U.S. The company is beginning to win market share with a sleek touch-screen device called the Hero. But whereas the iPhone runs on Apple's proprietary OS, the Hero, as offered by Sprint Nextel (S), runs on Android.

As Verizon Wireless enters the fray with Android, Google is set to become a major player in the smartphone market -- which is exactly where CEO Eric Schmidt wants to be. On a recent conference call, the Google chief said: "Android adoption is literally about to explode." Schmidt noted that Android had gone from being offered by one carrier on one device in one country to 12 devices in 26 countries on 32 carriers in less than a year. Android currently has 10,000 applications available -- not Apple's 80,000, but not too shabby either.

An additional benefit for Google is access to the very fertile mobile web advertising market -- a so-far largely untapped revenue source that is expected to explode in coming years. "We can make more money on mobile than we do on the desktop, eventually," Schmidt said last year.

With heavyweight service providers like Verizon Wireless lining up behind it and next-generation-now devices like HTC's Hero, Google is well positioned to gobble up some mobile market share in 2010. No wonder Schmidt stepped down from Apple's board and Art Levinson stepped down from Google's board, amid FTC scrutiny of Google-Apple board ties. Things might have gotten pretty awkward pretty quickly now that Google and Apple are going head-to-head in a high-profile area of combat.

Reader Comments (Page 1 of 2)

My Jailbroken iPhone is customized to the hilt, I can change themes everyday of the week if I chose to. Camera, yes. Video Recorder, yes. Tons of Apps, yes and it's all free. I Love my iPhone.
Good luck to ya Verizon, I hope your new phone works better than your company's customer service department.

Attention Everyone! look at the iPhone user on a droid page. You, as well as other AT&T users can say that Verizon has crappy customer service, but at least we have the leading network. At least our network has coverage everywhere. At least our carrier doesnt try to nickel and dime you. Yeah, the iPhone was a good concept, and thats all it will ever be. If I didn't know any better, I would say that Apple more that likely pays the media to "hype," the iPhone. What good is an intuitive phone that can't serve the purpose as a phone? And, I might ad, you have to jailbreak your device to get anywhere with it. Wow. I rest my case.

I wonder how this legally is any different than the legal battle that Microsoft got caught in during the 90's? I mean they got in trouble for bundling their products with certain crap already installed and that, that's what this merger is going to do as-well, so....

I have to wonder at the ignorance of both the analysts interviewed and the person who wrote this piece. The iPhone has always had a camera. The most recent camera has more resolution and does video. The iPhone has apps, which are much better than widgets and a method of customization. And, lack of 'openness' has not prevented it from being the more successful IT product in years.

I love my iPod Touch and wished the iPhone were connected with Verizon. AT&T doesn't have the service that Verizon does. But to go from my iPod to Android and lose all my apps that I've paid for won't happen. Apple should have hooked up with Verizon - a much better company. But it won't make me change to AT&T!

Apple always loses market share by keeping it's operating systems "proprietary". If they had opened their Mac operating system to other developers, there would be no Microsoft today, and Jobs and Wozniak would be the world's richest people, not Gates. Just ask Sony. Does anyone remember the VHS versus Betamax wars? Sony's Betamax may have been better, but JVC licensed VHS to anybody, and the prices dropped on VHS machines and once Blockbuster stopped carrying Beta movies, the format was dead. And in the ultimate irony, Sony began to manufacture VHS machines. Just as Apple now runs some forms of Microsoft products on their machines. The secret to mass-market success is to license your products to everyone!! Most people buy on price, and the more manufacturers who make something, the cheaper it gets. Yes, the Mac OS may be better than Vista (hell, a pen and paper may be better than Vista), but Apple has nowhere near the marketshare cause their stuff costs too much. Once again, Apple will end up losing market share in the smart phone market cause of their own bullheadedness. I still think that even at this late date, if Apple would simply license their OS and their iPhone and their ipod and whatever the hell else they make, they would crush everyone out of the market within 5 years and we'd all be using HP computers running Apple software. And Jobs and Wozniak would be laughing all the way to the bank. But hey,... what do I know. I've been unemployed for a year and I am broke. :(

Trying to one-up an existing popular product with a huge customer base is simply playing me-too. Iphone and itouch have been out for how many years now? While google is busy playing catchup, apple is well on the way to the next level.

What all the experts need to realize is the majority of the public does not care or know what a mobile platform is. All they care about is how easy is it to use and how good is the reception and what their friends tell them about their phones and apps. The i-phone has been successful because it is sooo easy to use and there is so many apps to choose from that are also easy to use and it dosen't hurt that it has the cool element. Most of us just want a phone that can do some other stuff too not a complete moble computer.

I phone photo's don't cut it (especially in lo light), reason enough to keep me from the I phone. But, it's not the phone, it's the network. What good is a phone you can't use when wandering this nation?? I Phone was a fun toy in limited areas, now it is being replaced by something more versatile....

~Apple could never match its 30% profit margins by selling software. Apple's average computer price is $900 (brought down by the Mac mini and least expensive MacBook.) The industry's average computer price is $450.

~Ninety percent of premium computers sold in the U.S. are Macs.

~Mac buyers are more affluent than Windows-compatible computer buyers.

To summarize, Apple has a great boutique market in devices - exactly what it wants.

I'm glad to see the most prominent error - that the iPhone does not have a camera - has been removed from this article. However, the claim it does not have a keyboard is almost equally faulty.

"Oct. 19 (Bloomberg) -- Apple Inc.'s sales and profit beat analysts' estimates on back-to-school demand for iPhones, iPods and Macintosh computers, sending the stock in after-market trading to its highest price in history.

Fourth-quarter net income rose to $1.67 billion, or $1.82 a share, from $1.14 billion, or $1.26, a year earlier, Apple said today in a statement. Sales advanced to $9.87 billion in the period, which ended Sept. 26. Analysts surveyed by Bloomberg had estimated sales of $9.22 billion and profit of $1.43 a share.

Apple has defied investors' concern that the economic slowdown would stifle demand -- sales and profit topped analysts' estimates in each of the previous three quarters. The company started selling the iPhone 3GS in June, spurring orders. Chief Executive Officer Steve Jobs also cut iPod prices, added new models and ran a back-to-school Mac promotion."

I agree with the above comment. This article is to speak on the new device presented by verizon to compete with the iphone. OBVIOUSLY verizon needs to compete there is no question about it. The iphone was a revolutionary invention, no doubt. But here is an attempt to legitimately threaten the iphone. Everyone seriously needs to hop off the apple bandwagon and embrace the competition that is (as stated previously above) HELPING the consumer. And lets take a moment to sit back and think about this, why wouldn't the public be supportive of a new product that not only runs on the BEST network in our nation but also offers upgraded functions of the iphone? The only thing drawing people in to the "apple nation" is the fact that it is currently hip and cool and you're fourth grader can figure it out. Lets step up our game people. You want to make steps forward with technology, then embrace the competition. You want to show your overwhelming love for apple, go down broadway and get a I